June 1999, Volume 6, Number 6
High Skilled Migration in the 21st Century
By Philip Martin, University of California at Davis, firstname.lastname@example.org
The movement across international borders of high-skilled workers, sometimes called professional, technical and kindred (PTK) workers, is expected to increase as their share of the work force grows and as economies shift from producing goods to services.
The Institute for the Study of International Migration at Georgetown University held a conference May 21-22, 1999 to discuss high skilled migration. Three themes emerged. First, policies follow patterns, i.e., the increasing flow of PTK workers is raising issues that need to be dealt with at national, bilateral and multilateral levels. Second, immigrant selection is often put in the hands of educational institutions and employers who select the "best and brightest" as students or employees, and these foreigners settle in the country in which they study and work.
Third, it is very hard to evaluate the global labor market for PTK workers, and thus develop appropriate regulation. From the point of the migrants and the host country institutions and employers, the outcome is win-win, as countries gain easy to integrate brain power. However, local students and employees may avoid fields with significant shares of foreign students and workers because the playing field is not level--the foreigners want both an immigrant status and salary; the locals want only salary.
There is some suggestion that such factors help to explain the declining percentage of US students obtaining PhDs in science and engineering. Such fields may be driven by both demand considerations--employer desires for PhD-trained scientists and engineers--as well as supply considerations--studying or prolonging US study can increase the chances of gaining immigrant status.
According to the World Bank, the world's GDP was $30 trillion in 1996, including $24 trillion in high-income countries [one percent growth in the world economy adds $300 billion]. World exports and imports of goods were about $5.5 billion each in 1996 through 1998, and service exports and imports were $600 billion each. Combined, world trade in goods was $11 trillion, and in services $1.2 trillion. As the share of services in economic output and trade rises, the physical weight of economic output has declined. The physical weight of US economic output has barely changed in the past 50 years, while its value has increased fivefold.
Trade in goods and services is increasing three to four times faster than the world economic output, one indication of global economic integration. The World Trade Organization is charged with liberalizing trade in goods and services. In 1994, a six-section, 29-article General Agreement on Trade in Services was signed to deal with temporary movements of "natural persons" acting as service providers and consumers (tourists etc). For more information: http://www.wto.org/wto/services/services.htm
Under the GATS, the US has agreed to admit 65,000 H-1B workers a year, i.e., the H-1B quota in US immigration law at the time the GATS was negotiated was incorporated in into the GATS, an international treaty. Some participants at the conference argued that locking the quota and entry requirements into international treaties nullifies the flexibility that is the raison d'etre of temporary worker programs, i.e., the US can increase but not decrease the number of H-1B visas. During the next round of GATS negotiations scheduled to begin in 2000, multinational corporations and immigration agencies are expected to play larger roles in obtaining migration concessions.
Will the current era of globalization end with work in another country being considered an expected part of a professional career? One participant cautioned that history might repeat itself. The era of globalization between 1875 and 1929, he noted, ended with high tariffs, little migration and an economic depression.
PTK workers are usually defined as those with a BA degree or more. The PTK share of industrial country workers and jobs is rising--about 25 percent of most industrial country workers and jobs could be considered PTK, e.g., in 1997, 24 percent of US residents completed four or more years of college, another seven percent had an associate's degree, and 17 percent had some college but no degree.
The world's labor force is three billion strong, including about 400 million workers in the industrial countries. Fewer than 100 million industrial country workers, and perhaps 50 million workers in developing nations, can be considered PTK workers.
In many industrial countries, foreign-born workers are five to 15 percent of the labor force, and the percentage is higher than average in PTK fields involving high-tech and nursing. However, it was emphasized several times that most workers in virtually all PTK labor markets are native-born, so that focusing on the foreign born is studying the "exceptions," not the rule.
It was also emphasized that demand and supply in PTK labor markets may be unusual. Demand may be due to the level of government funding, especially in health, defense-related work, and infrastructure, and the nature of the funding--is it carried out at universities that rely on foreign students, or in government labs that require citizen scientists? Supply is shaped by the number of citizen students interested in the field and its opportunities, as well as the number of foreign students.
Most countries welcome at least some temporary and permanent PTK migration, e.g., Australia, Canada, Israel, Singapore, and the US receive both temporary and permanent PTK migrants and most industrial and developing countries make PTK migration relatively easy. Japan in 1990 and France in 1998 approved legislation to facilitate the entry of PTK workers.
Many developing country nationals study in industrial countries, and the US, Canada, and many other industrial countries permit foreign students to adjust their status from student or scholar to permanent residents. By some estimates, 25 percent of PTK Africans have emigrated, many via foreign study. Return/settlement rates vary: it was noted that 88 percent of Chinese who got PhDs in the US did not return in the early 1990s, while only 11 percent of Koreans failed to return (the Chinese in the early 1990s were helped by changes in US immigration law that facilitated their stay). Overall, 45 percent of foreign students who got PhDs are in the US 10 or 20 years afterward.
Universities in Australia, Canada, and the US often see foreign students as an economic plus because of their spending on tuition and living costs. Universities in France and Germany, by contrast, often view foreign students as development assistance, since state-run universities do not charge tuition. For example, there is no tuition charge for French or foreign students, and about two-thirds of the foreign students, many from former French colonies in Africa, find ways to stay in France despite the absence of paid post docs and other university-based employment. In 1996-97, about 125,000 of the 1.4 million students in French universities were foreigners; half of the foreigners were from Africa. The percentage of foreigners rises at the PhD level; French universities award about 10,000 PhDs a year, including 2,800 to foreign students.
Canada admits about 30,000 foreign university students each year, and has 75,000 to 80,000 foreign students enrolled at any one time. Canada generally charges students lower tuition then US universities said, and some Canadians argue that Canadian taxpayers are subsidizing the development of human capital for the US, since Canadians and foreign students trained in Canada sometimes move to the US (some US firms recruit at Canadian universities, knowing that Canadians can get TN visas). Canada is considering a plan to induce returns by forgiving federal taxes for three years (the refund comes in the fourth year) for Canadians who return to Canada.
If foreign students become immigrants, who wins and who loses? The foreign student gains--she made the choice--and so do US employers and probably US taxpayers, since college-educated residents on average have higher than average incomes and lower than average unemployment, even if their US education was partially subsidized by US taxpayers. There may also be a security risk from training foreign students and hosting foreign scholars in high-tech fields, as exemplified by the recent developments with China.
Do sending countries lose the investments they have made in young citizens who emigrate? Some argue that the settlement of foreign students is a brain circulation, not a brain drain/gain, because students may return to their countries of origin despite obtaining immigrant status abroad. Others argue that sending nations gain because the immigrants send remittances home. If they return, this argument runs, educated persons might add to troublesome un-or under-employed elite.
One irony of current patterns is that, at US land-grant universities, almost half of the graduate students are foreigners in agricultural departments, and it is in the agricultural departments that the US Peace Corps aggressively recruits Americans to volunteer to help develop agriculture in the students' countries of origin.
The fact that foreign students want to and can become immigrants is considered to lead to several distortions in US labor markets. First, many foreign students want more than an education; they also want a green card, and their chances of finding a US spouse or employer to sponsor them increase with time spent in the US, encouraging long educational stays. While waiting for a sponsor, foreign students are often willing to accept lower wages and worse working conditions, because they see jobs as stepping stones to immigrant status.
Second, the financing of science and engineering research increases reliance on foreign students. Graduate programs need students willing to act as research assistants to conduct research at relatively low wages. The wage premiums for MA and PhD degrees in science and engineering are not sufficient to induce many US students to pursue education beyond a BA/BS. The US has developed a post-doc system for newly minted PhDs to spend several years working in a professor's lab at another campus, and in the biological sciences, there can be three to six postdocs, meaning that a scientist could be in her mid-30s before getting her first "real" job.
The availability of willing foreign students has allegedly stretched out many courses of study. It was noted that many PhD programs now require five to seven years for a degree, while some MBA programs, which enroll a high percentage of natives, have been shortened from 24 to 18 months because of the high opportunity cost of study--starting salaries average $75,000.
Can regional trade and migration agreements facilitate the flow of PTK workers across borders? The US-Canada Free Trade Agreement went into effect in 1989, when there were no limits on the number of visas (then H-1) available to temporary foreign professionals. There was no limit on the number of Canadian professionals eligible to migrate to the US, or from the US to Canada under the FTA. In order to extend these provisions to all of North America, NAFTA established a list of 60-70 professions in which there is free US-Canadian mobility without quotas and ended the current 5,500 a year quota on Mexico-US movements on January 1, 2004.
To obtain a TN-work visa to work in US under NAFTA, a professional shows up at the border with proof of identity, evidence of BA or more education, and a US job offer in an approved occupation. Once issued, TN visas are renewable indefinitely. Spouses and children of TN workers may enter the US, but are not allowed to work in the US unless they can find an employer to sponsor them for a TN or H-1B or other visa. Spouses and children of US NAFTA migrants in Canada can work.
The TN visa has become controversial in the nursing labor market. Many US nurses complain that they cannot find jobs because of competition from Canadian nurses who enter the US with TN visas for higher salaries: $C1 = $0.68. About 42 percent of the nurses who graduated in Canada in 1994-95 were in the US in 1998. Some Chicago hospitals recruit Canadian rather than US nurses; the Canadians are believed to be more likely to accept night and weekend work.
The US House of Representatives in May 1999 approved legislation, H.R. 441, that would permit up to 500 foreign nurses a year to enter the US for up to five years; the previous program expired in 1995. Hospitals seeking foreign nurses must be in an area experiencing a shortage of health care professionals, as designated by the Department of Health and Human Services; have at least 190 acute-care beds; and have certain percentages of patients on Medicare and Medicaid.
Canada also recruits foreign professionals living in the US who visit Canada. For example, the Canadian consulate in Detroit kept a record of H-1Bs who visited Canada, and invited them to consider "smart Toronto" as a place to live. It was noted that most could qualify for temporary or permanent residence status in Canada, and then, if they wanted to return to the US after several years, they could do so with a TN visa--Canada would get the value of their work for at least several years.
The conference also dealt with PTK migration in Europe. Freedom of movement and freedom to provide services are two of the four freedoms on which the EU was founded (the others are the freedoms to move goods and capital), but only two percent of EU nationals work in another EU nation. There has been some upward movement in the number of professionals moving in the 1990s as a result of cross-border mergers and investment, but there is little expectation of a further increase.
One background question was: what does the tendency of students and foreign workers becoming immigrants mean for immigrant policy? Does adjustment of status in effect turn immigrant selection over to unaccountable educational institutions and employers? Educational institutions and employers who insist that they have selected the "best and brightest" person from the global labor market to fill a vacant job oppose labor certification, the government-supervised process under which employers attempt to recruit local workers. Certification, they argue, tends to produce minimally qualified domestic workers, not the world's best.
The US relies more on US employers to select immigrants than does Canada--Canada emphasizes the government assessment of individual characteristics, while the US gives weight to a US employer's selection of a foreigner to fill a job. The Canadian system has been described as one that emphasizes supply-side or worker characteristics, and the US as a system that emphasizes demand-side or employer desires.
L-1 visas allow multinational firms to transfer managers and professionals from foreign firms to the US. There was widespread agreement that, from the firm's point of view, the "blanket L" visa program was successful. The INS makes a determination that a US firm with at least 1,000 employee and $25 million in sales and using at least 10 L visas a year can obtain the right to name the person to be transferred without consulting the INS--the US consul in the sending country acts as the US government gatekeeper. Many US firms would like to see this model expanded.
The Immigration Act of 1990 changed the previous H-1 program into the H-1B program at a time when it was believed that there would be significant increases in the employment of PTK workers, especially in the US computer industry. To satisfy unions, an annual limit of 65,000 H-1B visas was established, which was raised temporarily to 115,000 a year.
The H-1B visa limit of 115,000 for FY99 was reached in May 1999. The H-1B program admits foreign professionals with a college degree or more to fill US jobs that require a college degree. H-1Bs receive work and residence visas valid for three years that can be renewed for three additional years.
The INS testified in May 1999 that the American consulate in Chennai, India, which processed applications for 20,000 H-1B workers in 1998, found that 21 percent of a sample of 3,200 H-1B visa applications were fraudulent. The most common types of fraud involve US companies: (1) attesting that they need H-1B workers even though they do not have a specific job for a worker to fill once the foreigner reaches the US; and (2) falsifying the educational qualifications of H-1B workers sent to the US.
Many of the US employers believed to engage in H-1B fraud are H-1B dependent firms, sometimes called "body brokers" or job shops that hire only or primarily H-1B workers and then find jobs for them at other US companies. For example, the INS reported that the H-1B applications of 68 workers at Quality Information Systems Inc. of Southfield, Michigan included false information about pay and job locations. QIS was founded in 1994, and has 400 employees at 10 offices in the U.S., Canada, Singapore, India and Great Britain.
Many US computer firms are opening offices overseas to save money by importing the work product of employees abroad, rather than paying programmers to work in the US. Since many programmers in the US are foreigners, this strategy substitutes trade for migration.
The most recent overseas location for US companies is Mexico. Softek, a Mexican software company based in Monterrey, Mexico, has 2,800 engineers and programmers whose average age is 26 and who earn an average $12,000 a year. Monterrey, with a highly regarded technical university, hopes to challenge India for some offshore programming work because it is in the same time zone as US firms.
Joint Venture: Silicon Valley Network released a report claiming that there was a shortage of 160,000 workers to fill high tech positions in Silicon Valley, and that each vacancy costs $6,000 and $8,000. For more information: http://www.jointventure.org/
J-1 visas are available to nonimmigrants who are sponsored to come to the US for educational and exchange programs; the United States Information Agency (USIA) certifies US programs and firms that can sponsor foreigners seeking J-1 visas.
Most J-1 visas are issued to visiting scholars and students. However, some J-1 visas are issued to au pairs, usually young European women who come to the US to live with a host family and care for young children while attending a US educational institution. J-1 nonimmigrants must return to their countries of origin for at least two years before being permitted to adjust status to immigrant.
USIA issued new regulations in April 1999 designed to counter what it believes is the tendency of US sponsoring organizations to stress the child care benefits of the J-1 visitor to US families, while emphasizing the educational and travel opportunities of living with a US family to the European women. Under new regulations, the US families and au pairs would have to read a brochure written by USIA, and the US host family would have to assure themselves of the au pair's English-language skills with a telephone conversation before final placement.
Hotel firms can rarely justify hiring H-1B professionals because most hotel jobs do not require a BA--the H-1B program requires the foreigner to have, and the job must require, a BA. Thus, many foreigners enter the US for hotel jobs under the exchange visitor program. But the foreigners who come to the US under the J-1 exchange visitor program often seek to stay, forcing some US employers to escort them to planes to ensure their return.
Religious workers. A bill was introduced in the House in May 1999 that would amend the 1990 IMMACT to make permanent the special immigrant religious-worker program, which is set to expire October 1, 2000. Up to 5,000 foreigners can immigrate each year as religious workers.
US Labor Market
The unemployment rate in April was 4.3 percent; the US has added a net 18 million jobs in the past six years. California's unemployment rate dropped to its lowest level in the 1990s, 5.6 percent; the state is expected to add 450,000 jobs in 1999.
Congress is likely to approve an increase in the federal minimum wage, currently $5.15 an hour, to $6.15 an hour by 2000 or 2001. A four-person family with one person earning $5.15 an hour for 2,000 hours earns $10,300 and is eligible for about $3,600 in Food Stamps plus an earned income tax credit of $3,880, or a total of $16,100, well under the poverty line. A $1 increase in the minimum wage would add $2,000 to this family's income.
Many economists believe that higher minimum wages reduce teenage employment. About 3.3 million teens were employed in May 1999, and most models predict that increasing the minimum wage from $5.15 to $6.15 an hour would reduce teenage employment by 60,000 to 100,000. Some economists favor increasing the EITC rather than raising the minimum wage. The EITC currently is reduced by $0.21 for each dollar earned above $12,500.
California's minimum wage is $5.75 an hour; the federal minimum wage is $5.15. The federal Earned Income Tax Credit provided a refund of income taxes paid, or a federal payment if taxes were not due, of up to $3,656 to workers with children who had wage earnings of up to $30,000 in 1997.
Should the minimum wage be raised or the EITC expanded to help the working poor? About 25 percent of California families have at least one minimum wage worker, and some businesses want the state to supplement the federal EITC rather than further raise the minimum wage, arguing that the EITC better targets benefits for the working poor.
As labor markets tighten, there is a growing debate over how to increase the US labor supply. Instead of immigration, some advocate putting more of the 1.2 million US prisoners to work. The prison population has doubled in the past ten years. Currently, 22,000 of the 127,000 federal prisoners, and 5,000 of the 1.2 million state prisoners have jobs, and most of these jobs involve maintaining prisons. Federal Prison Industries is the major generator of "real" jobs for prisoners-- making furniture for the federal government, and paying prisoners $0.23 to $1.15 an hour, of which the prisoner gets half.
The tighter labor market is helping more young Black men to get jobs, raising the percentage of Black men in the labor force. In the 1950s, about the same percentage of young white and young Black men were in the labor force, but Blacks earned about one-third less. By the 1970s, the earnings gap had closed, but far fewer young Black men were in the labor force, and the movement of jobs away from central cities, as well as increased competition from immigrants, made many experts skeptical that Black men could be re-integrated into the labor force. The 1990s boom has proven them wrong; in the cities with the lowest unemployment rates, employers are hiring workers with little education and with prison records. About seven percent of Black men aged 20 to 24 are in prison.
Employment in motion pictures and television in Los Angeles County almost doubled from 76,000 in 1990 to a peak 142,500 in February 1998 before falling to 130,000 in 1999--industry revenues were $27 billion in 1998. Many productions have moved to Canada, Australia and other foreign locations to save money. The Canadian and provincial governments offer incentives to foreign film producers that, for example, rebate 22 percent of a film's spending on Canadian labor. Producers estimate that labor costs, which are about 40 percent of film production costs, are 30 percent lower in Canada, resulting in a 10 percent savings on a $2 million one-hour TV episode.
Fast Food. The fast-food industry is the largest employer of first-time entry-level workers in the US. Harvard anthropologist Katherine Newman examined employment at pseudonymous Burger Barn in Harlem and concluded that, despite African American managers, the "the likelihood of being rejected [for jobs] was greater for African Americans than it was for the Latinos who didn't live in the area. And this was in a Black neighborhood with Black customers, management and owners. This wasn't a racial divide, but a preference."
"Employers have a favorable impression of immigrant labor. Even though they themselves are Black, they often have a jaundiced view of the urban, or African-American labor force. They had very fine-grain preferences when it came to immigrant labor. I had managers say to me that what they really wanted were recent immigrants, people who grew up in really poor countries who would not think of this as a bad job, but instead as a king's ransom compared to what they might find in Haiti or the Dominican Republic. Latinos apply in smaller numbers than Blacks but are much likelier to get hired." (Salon, April 30, 1999).
A three-judge panel of the Ninth Circuit Court of Appeals ruled that about 10,000 current and former workers hired through temporary help agencies to work at Microsoft since 1986 could be considered a "common-law employee" of both the temporary help agency and Microsoft, and that Microsoft had thus unlawfully denied them the chance to buy stock twice a year at a 15 percent discount. A common-law employee is a worker who has spent more than five months at a company and is substantially under the control of the company. Microsoft hires about 6,000 temporary employees in a work force of 30,000 worldwide.